Research was done by Isaiah He of DX2 Capital Management
China's E-Commerce Market Overview
The idea of e-commerce was first introduced to China as early as 1999, when the internet was a concept that many Chinese citizens had never heard of. The pioneers in this industry, such as Alibaba (BABA), Dangdang (DANG), and Ctrip (CTRP), went through the ups and downs during the early years, and it was not until 2003, when SARS broke out like a plague, that the e-commerce industry got a chance to grow. During the SARS outbreak in 2003, ordinary citizens were forced to stay home, and the "normal" ways of doing business or shopping no longer worked, so people began to execute their daily activities online. During the time, JD.com (NASDAQ:JD) was hit hard like all the other retail stores; Richard Liu, JD's founder, was forced to have a store online to avoid being out of business. To his surprise, his online shop proved to be an enormous success; JD's online business experienced a compound growth rate of more than 26% per month from 2003 to 2004 (Chinese language source).
The crossroad soon came as SARS went away, and JD had to make a difficult decision: should it transform into an online retailer or just stick to the old way of doing business, since the offline retail stores still contributed to more than 90% of JD's income after SARS. Richard Liu decided to take a chance; he closed all 12 stores in 2005 and began to transform into exclusively doing business online. In 2007, JD built up its logistic systems in Beijing, Shanghai, and Guangzhou, and offered POS machine for customers who wish to pay at delivery. Then, from 2007 and on, the company has expanded its product lines from 3C (computers, communication devices, and consumer electronics) to an all-in-one online store that we have today.
